John Buell

Class War in America

I recently attended a fundraiser for first district Congressman
Tom Allen (D-Maine). The congressman faces only token opposition this
fall, but I was interested in hearing his analysis of life in the
most conservative Congress in my lifetime. During the Q and A
following the talk, a friend of mine asked Allen: "How can
Republicans continually vote against the minimum wage, vote to cut
heating assistance, to slash Medicaid? Do they have any sense of what
it takes for ordinary people to get along in today's economy?" Allen
responded that many Republicans profoundly believe that people are
better off solving problems on their own and that government
inevitably either screws things up or even undermines their will and
moral fiber. The Congressman added that from his point of view,
Republicans missed one essential aspect of traditional US values.
Americans do believe in individual initiative and hard work, but they
also believe in community and government support to help each other
through troubled times. My friend then asked a follow-up question
that should stir much more debate on the current agenda: If
Republicans believe that every man and woman should make it on their
own, why does the party support so many subsidies for oil companies,
agribusiness, the major media and the drug companies, among
others?

More broadly, we might ask if the current corporate economy,
rather than being some pure free market modeled on Adam Smith's
Wealth of Nations or Milton Friedman's Capitalism and Freedom, isn't
a deck stacked by and for those who are already wealthy, powerful and
well esteemed. A recent book by economist Dean Baker, The
Conservative Nanny State (which is also available for download at
www.conservativenannystate.org) raises the question of whether
political debate in this society has been poorly framed. The Bush
conservatives are supposed to love the free market whereas advocates
of social justice are cast as opponents of the discipline and
efficiency of the market. Baker's challenging and persuasive work
shows case after case where government subsidies and regulations give
advantages to those who are already well placed.

Why are Jeff Bezos and Bill Gates billionaires and why have the
drug companies, despite periodic scandals, continued to rake in
enormous profits? Gates and the scientists working for pharmaceutical
firms are intelligent and creative. Their discoveries surely have
benefited us, but both have profited immensely from the ability to
patent or copyright their discoveries. Patents and copyrights give
their holder the right to be a monopoly provider of a good or
service. Adam Smith feared monopolies and wanted to see them granted
only under the most restrictive circumstances. Patents for medicine
are supported on the basis that these profits finance further
research, but the level of protection guaranteed is so substantial
that the price of prescription drugs stands at three times the level
a competitive market would generate. The pharmaceutical industry's
own statistics show it spent $41.1 billion on research in the United
States in 2004 but "this means that the country spends more than
three dollars in higher drug prices for every dollar of drug research
supported through the patent system. The rest of the additional
spending went to marketing, high CEO pay and drug company
profits."

Innovation is valuable, but could be purchased much more
inexpensively and without entrenching a financial aristocracy.
Government could increase spending for both fundamental science and
for new drug R and D. It could make grants to promising research
teams on the condition that all patents are then placed in the public
domain. It could award lavish prizes on researchers who made singular
contributions. All of these steps would entail far less expense than
our current system. In addition, such reforms need not eliminate the
older private patent system. If private companies continue to believe
their system of patents is more efficient, they could continue to
finance secret research for their own patents and simply run the risk
that the open system might generate better medicines more quickly. If
modern conservatives really are interested in choice, this is an
option government policy should offer.

Similarly, computers and the Internet have opened up remarkable
opportunities, but tax law often redistributes resources to those who
have. When working-class citizens go to the casino and gamble, they
pay a transaction tax regardless of whether they win or lose, but
when upper-class investors buy and sell stocks, they face no
significant transaction tax. Rapid and often market-destabilizing
purchase of stocks and bonds are free, but not so with the forms of
gambling more common among the working class.

Whole new industries fostered by and disproportionately
benefiting upper-class professionals escape taxation. Those of us who
are more comfortable browsing the Web and buying our books or clothes
over the Internet pay no taxes, while other citizens who are more
accustomed to buying these items at the local stores must pay state
sales taxes. This huge inconsistency in the law has helped make Jeff
Bezos a very wealthy man and has amounted to a subsidy to many
middle-class professionals at the expense of many working-class
citizens and many local businesses.

Leona Helms once famously argued that taxes were for the little
people. It seems that a genuinely free market is also only for the
little people. Welfare has been dramatically scaled back, social
security and pensions are to be privatized, but state protection
thrives for those who are already well placed. Apparently, the rich
are worthy because they are rich.